Summary
In Smith v. Hotel Ritz Co., 74 N.J. Eq. 616, 70 A. 137, the Vice Chancellor held that a receiver could not be regarded as a judgment creditor within the meaning of the conditional sales statute (although under the Chattel Mortgage Act, [1 Comp. St. N.J. 1910, p. 463], which protected creditors generally, a receiver could assert the invalidity of an unfiled chattel mortgage).
Summary of this case from Quinn v. Bancroft-Jones CorporationOpinion
05-12-1908
SMITH v. HOTEL RITZ CO.
U. G. Styron, for complainant. Eli H. Chandler, for petitioners. Oliver Y. Rogers, for receiver.
Suit by Elizabeth Smith against the Hotel Ritz Company to determine whether an unrecorded conditional sale agreement is valid as against a receiver and general creditors of defendant insolvent corporation. Judgment for complainant.
U. G. Styron, for complainant. Eli H. Chandler, for petitioners.
Oliver Y. Rogers, for receiver.
LEAMING, V. C. I am unable to determine that the unrecorded agreement of conditional sale now in question is void as against the receiver or general creditors of defendant corporation. The chattel mortgage act under consideration in Graham Button Company v. Spielmann, 50 N. J. Eq. 120, 24 Atl. 571, and in Currie v. Knight, 34 N. J. Eq. 485, provided that mortgages not executed and recorded in accordance with the act should be void as against creditors of tbe mortgagor. While in Currie v. Knight, supra, it was held that creditors could not, without a judgment or other lien on the chattels, assert their claims against the validity of such a mortgage, it was also held that, when a lien should have been procured by a creditor and the invalidity of the mortgage asserted by virtue of the lien, the infirmity of the mortgage would be ascertained by reference to conditions obtaining at the time the creditor became a creditor, and not at the time the lien of the creditor was procured. The provisions of the act that the mortgage should be void as to creditors (general creditors) was thus observed and enforced. In Graham Button Company v. Spielmann, supra, it is held that insolvency of a debtor corporation operates, under our statute, to fasten the debts of such corporation on its property in such manner as to enable the receiver of the corporation, in behalf of its creditors, to assert the invalidity of a chattel mortgage which has not been executed and recorded in accordance with the provisions of the chattel mortgage act. It is manifest that the principles controlling these decisions do not extend to the present case; for the provisions of our statute touching conditional sales of chattels (P. L. 1898, pp. 699, 700, §§ 71, 72) protect only judgment creditors, subsequent purchasers, and mortgagees without notice. While the claims of general creditors of an insolvent corporation are fastened upon its property by force of the provisions of our corporation act touching insolvency and the appointment of receivers and distribution of assets, in such manner as to enable either a receiver or general creditor to assert in this court the invalidity of a chattel mortgage which the statute declares void as to creditors, yet it is apparent that such receiver or general creditors cannot in any sense be regarded as judgment creditors within the meaning of the conditional sales statute referred to.
I will advise an order directing the receiver to deliver the chattels in question to petitioner.